The interest rate is stated as 12.53% nominal annual rate, compounded quarterly.
ID: 2775710 • Letter: T
Question
The interest rate is stated as 12.53% nominal annual rate, compounded quarterly. $1000 put into an account now will be worth how much in 8 years? ANS. The effective interest rate is 4.27% for 26 weeks. If interest is compounded weekly, what is the effective rate per year (52 weeks)? ANS. Deposits of $ 150 arc made at the end of every fourth year with the first deposit made at the end of year 8 and the last one at the end of year 20. How much will be in the account at the end of 20 years. Interest is 10% effective per year, compounded annually. ANS
Explanation / Answer
1) Quarterly rate = 12.53 * 1/4 = 3.1325%
Number of quarters = 8 *4= 32
Future value = Present value * FVF@3.1325%,32
= 1000 * 2.6832
= $ 2683.20
2) Effective rate per year = m * [(1+i)^1/m - 1]
= 52 * [(1+.0427 )^1/52 -1]
= 52 * [(1.0427)^.019231 -1]
= 52* [1.0008044-1]
= 52 * .0008044
= .0418 or4.18%
3) Future value = (F1 * FVF@10%,12) +(F2 *FVF@10%,8)+(F3*FVF@10%,4) +(F4*FVF@10%,0)
=(150 * 3.13843 ) +(150 * 2.14359 ) +( 150 * 1.4641 ) +(150 * 1)
= 470.76 + 321.54 + 219.62 + 150
= $ 1161.92
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